Macroeconomic Review: Mutual trade and remittances lay the ground for economic recovery in EDB countries

05 July 2017

Moscow, 4 July 2017. The economic trends observed in the member countries of Eurasian Development Bank (EDB) improved in Q2 2017. This development is largely based on the recovery of key transmission channels in the region, primarily trade and remittances. These are the findings of the Monthly Macroeconomic Review prepared by the Chief Economist Group at EDB. The report states that in May 2017, remittances turned positive in all EDB countries. While in the Kyrgyz Republic, some positive rates of growth of remittances were registered already last year (21.6% for 2016), in Armenia, growth of remittances turned positive only in early 2017, exceeding 40% in dollar terms in May 2017 compared to the same period of 2016. In Tajikistan, after the annualised decline in remittances of over 70% in Q1 2016, remittances increased by 1.3% in Q1 2017 (based on data provided by the Central Bank of Russia).

In foreign trade, the Armenian economy demonstrates further significant achievements, with notable export growth, which reached nearly 40% in May 2017 against the same period of 2016, including both commodity and food exports. Similar developments are registered in the Kyrgyz Republic, where high rates of growth of gold exports, which raised by the factor of 1.5 in January-April 2017 compared to January-April 2016, are combined with a significant growth of textile and agricultural exports, which increased respectively by the factors of 1.5 and about 2 in January-April 2017 compared to January-April 2016.

“In general, mutual trade is expanding in all EDB countries, creating prerequisites for a more sustainable recovery of economies in the region in the coming few years,” says Yaroslav Lissovolik, Chief Economist at EDB.

The authors of the report note the improved dynamics of economic growth in Q2 2017 in most EDB member countries. For instance, in the Russian Federation, according to the estimates prepared by its Ministry of Economic Development, the annual GDP growth accelerated in May 2017 to 3.1%, while the growth of industrial output was 5.3%. In Kazakhstan, according to some preliminary estimates of the Ministry of National Economy, the GDP growth for January-May 2017 was 4.1%, while in Belarus the negative economic growth turned positive reaching almost 1% in January-May 2017.

In the context of accelerating growth, the macroeconomic policies of EDB member countries have become more conservative – in Armenia, the budget deficit is getting significantly lower, down from AMD 70.3 billion in January-May 2016 to AMD 40.1 billion in January-May 2017, while in Belarus, the budget surplus has increased from 1.4% of GDP in January-May 2016 to 3.6% of GDP in January-May 2017. In the Russian Federation, the lower than in 2016 budget deficit of 1.7% of GDP, largely explained by additional revenues generated due to higher oil prices, is supported with government decisions to revise the planned budget deficit for 2017 downward from 3.2% of GDP to 2.1% of GDP.

“The external environment of EDB countries had somewhat stabilised by end-June 2017 due to the oil price recovery. However, the significant drop of commodity prices observed over the last few months displayed the remaining risks to the economic recovery trend in the region, as well as to the downward trend in inflation. In addition to the potential depreciation of national currencies of oil exporting countries, another negative factor for the economies of the region could be a decline in crop yields due to the weather conditions this year and growing food prices,” notes Yaroslav Lissovolik, Chief Economist at EDB.

The full version of the Monthly Macroeconomic Review is available here.

All EDB’s monthly reviews are available online.

Additional Information:

Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. EDB’s charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.

EDB Media Center:
+7 (727) 244 40 44 ext. 6147 (Almaty)
+7 (495) 645 04 45 ext. 2732 (Moscow)

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